FTC: $1M settlement in debt collection scheme

WASHINGTON (AP) — A debt collection operation that involved text messages and collectors allegedly posing as attorneys has led to a $1 million settlement with the federal government.

The Federal Trade Commission said Wednesday that a debt collector in Glendale, Calif., agreed to pay the civil penalty in order to settle FTC charges. The commission alleged that Archie Donovan and two companies he controls — National Attorney Collection Services, Inc. and National Attorney Services LLC — used text messages and phone calls, and failed to disclose that they were debt collectors, which is against the law.

In their messages, the collectors used their company names or variations of it to lead consumers to believe an attorney was contacting them, the FTC said. They also falsely threatened to sue consumers for not paying debts or to garnish their wages, and they illegally revealed debts to the consumers' family members, friends and co-workers, said the commission.

"No matter how debt collectors communicate with consumers — by mail, by phone, by text or some other way — they have to follow the law," said Jessica Rich, director of the FTC's bureau of consumer protection.

Donovan's attorney, Barry J. Cutler, said his client cooperated with the commission as it investigated the matter.

"The companies are now in compliance," said Cutler. "Nobody was intending to violate the law."

A mailing from Donovan and his companies, the FTC said, used envelopes with a picture of a large arm shaking money from a consumer who is depicted upside down, with cash falling from his pockets. According to the commission, mailing envelopes can only include the name and address of the company and may not indicate that the consumer may owe a debt.

As part of the settlement, Donovan and his companies are barred from sending texts that do not include disclosures about their identity. They also need a consumer's consent before they can send them a text.